I’m curious about this: what is REAL financial security? To me it is the ability to build income PURELY through returns on your investments, and have that return cover your expenses for the rest of your life.

Let’s see what it means for me, taking figures I know. Over the year, I spend about Rs. 7.2 lakhs, which accounts for my regular expenses, travel, holidays, thrills, necessities etc. and some buffer I’ve included once I have a bigger family. I know this is a little high, but I will assume that I don’t want to change my own lifestyle and see. I want to retire after 13 years, when I’m 45.

I’ve invested in high return securities like stocks, which have returned about 10% a year conservatively speaking. So let’s assume I cash some stocks every year, and pay the tax of 10% of short term capital gains (If I keep reinvesting the portfolio). That’s a net return on 9% on my investments.

Also I need to figure a cost of Rs. 10 lakh (today’s money) for my kids’ higher education costs.

So how much do I need to invest, if I expect to live till I’m 80? I’ve done my excel calculations and here’s what I found:

Age now: 32

Age at Retirement: 45

To survive until age: 80

Funds grow at (tax adjusted): 9%

Inflation expected: 6%

Corpus needed at age 45: Rs.3.3 crores.

Wow. That’s a big figure. To reach there, I have to invest Rs. 96,000 per month at a net return on 9% to make it!

Now to extrapolate this to right now: If I retired next year, how much money do I need?

Age now: 32

Age at Retirement: 33

To survive until age: 80

Funds grow at (tax adjusted): 9%

Inflation expected: 6%

Corpus needed next year: Rs. 1.98 crores.

This, really, is the amount of insurance I should have; since this is the money my family will need should something happen to me, or that I will need in case I’m in a bad accident that disallows me from working.

You can calculate this too – either as a simple calculation using excel or otherwise. You can even load in costs; such as kids education costs, marriage/college costs, any medical fees you expect etc. and find out how much money you need. Based on that, invest. Note that you need to beat inflation substantially – only investments that yield above 10% make sense; and the earlier you start investing, the better.

The excel sheet is with me – but it’s not very easy to use. I can send it to you if you want (mail me) or I can load it up on the net as a separate application.

** Update 27 Aug 2009 **: I have finally found the time to upload this spreadsheet. Download it here. Enable macros, fill in the blue fields, and hit the calculate button.

Note: No warranties, no guarantees, and definitely no liability to me. This is not financial advice, just an educational exercise. and feel free to pass it on as it is. Modifications are welcome with due credit to all participants. Please pass it back to me so I can update the article too.

>Deepak,

First of all, I would like to thank you for linking to my blog. I receive a few referrals from your site everyday and am very grateful to you for that:)

I also really liked the way you determined the amount of insurance you need. Never thought of life insurance that way, as the conventional wisdom is to go for a multiple of your gross annual income (generally between 5-10 times). And I can see I am waaaaay under-insured!

>Hi Deepak,

Can you kindly send me the excel sheet you used to calcuate the corpus to my email id, which is ajay_rh@hotmail.com

Thanks in advance,

Regards,

Ajay Hegde

>Hi Deepak,

I am recently came to know about your blog and it is very informative.

Please send the excelsheet to my email id dpradipkumar@gmail.com

>Hi deepak

please send me that excel at vinayaka.shares@gmail.com

Thanks

Vinayaka

>Hey Deepak,

Could you please share the excel sheet with me at dinhabhasheen at yahoo dot com.

Thanks,

Dinha

>Hi Deepak,

Please send me the excel file to my id ssparnatti@gmail.com

Regards

Sachin

>Hi Deepak,

Can you kindly send me the excel sheet you used to calcuate the corpus to my email id, which is p dot deshpande at gmail

(to avoid email bots pick up my mail for spam)

Regards

Prashant

>Hi Deepak,

My outlook about life insurance got a good jolt after I read your blog. Can you kindly send me the excel sheet to calcuate the corpus I need at retirement to my email id, which is razhekummar@gmail.com

Thanks in advance,

Best regards,

Raj Kumar

>Hi Deepak,

I am really impressed with you calculations. can you kindly send the excel sheet to ram1576@gmail.com

>Hi Deepak,

interesting read, could you mail me the excel sheet at b.saharia@gmail.com,

Regards,

saharia

>Hello Deepak.

I have come across this website recently while exploring web.This is an excellent place to find tips on various finance related issues.

Could you please send me the excel sheet you used to calcuate the corpus to my email id, which is nilesh.patil@lntinfotech.com

Best Regards

Nilesh Patil

>Hi Deepak,

Can you kindly send me the excel sheet you used to calcuate the corpus to my email id, which is nsipwr@gmail.com

Thanks in advance,

Regards,

shekhar

>Hi Deepak,

Can you kindly send me the excel sheet you used to calcuate the corpus to my email id, which is jitendra_sap@hotmail.com

Rgds, Jitendra.

>hello, Deepak

An informative write up for investors. Like everyone on this blog i request you to send me the excel worksheet; to help me imporve my investment ahead. Email: chandan.parulkar@gmail.com

thanks,

Chandan

>Hi Deepak,

Can you send me the excel sheet to bsurit@yahoo.com.

Thanks

Ruby

>HI Deepak,

Nice & informative article. Plz send me the excel sheet to my mail id:

gautamsaraswat@gmail.com

gautamsaraswat@spencersretail.com

>Deepak,

Its really an attractive post. Can you please share your excel.

Thanks for the thoughts.

Regards

Manav Ahuja

http://manavahuja.blogspot.com

>hi

great work buddy

kindly send the excel sheet at

ximb.pankaj@gmail.com

Thanxs

>hi deepak,

I am really impressed with you calculations. can you kindly send the excel sheet to nikhil201053@yahoo.co.in

nikhil201053@rediffmail.com

Thanks in advance.

Regards

nikhil shah

>Its a good calculation, can you pls share the xls for me. pls mail on manishdk@hotmail.com.

rgds,

manish

>thanks for the informative article. can you pls send me th excel sheet on sskale@mail.com

thanks

>THANKS THIS IS REALLY INFORMATIVE..PLEASE SEND THE EXCEL FILE AT RAJWADEM@YAHOO.COM THANKS

>So if I have 2 crore cash in my bank, (I am excluding the house value here) than you are saying I don’t need to work anymore? Banks give some 9% returns in FD, so that’s safer and better for next 5 to 6 years as I see the markets will doom for atleast next 5 years. Send that excel sheet, if you still have it, to nautankidrama@yahoo.com

>Hi Deepak, An extremely interesting perspective on the corpus requirement for retirement planning. Can you please send me the excel sheet you used to calcuate the corpus to my email id which is mbrcal@gmail.com.

Regards

MBR

>Can you kindly send me the excel sheet you used to calcuate the corpus to my email id, which is

mehulinvest@yahoo.com

mehulshah

09825674668

>HI Deepak,

Just Loved the analysis …

can you please send the excel file at

ptomjose@gmail.com

>Deepak, allow me to express alternative views.

Usually there are many pseudo aasumptions in projected estimates when financial planners want to convince security conscious public and suck them into insurance products, mutual funds and other instruments for which they earn fat commisions.

It is time to remove this myth of early retirement concept. Retirement income Financial models are designed (similar to derivatives)to siphon as much of your savings into portfolio which is predominently earning commissions, management fees, brokage, retaining components etc. for the financial instistitutions, banks, their executives and agents.

>In the excelsheet, cell-c23 has 'current value'. What does this mean? Does this mean the amount-of-money-one-has-which-is-currently-invested?

In that case the cell C23 should also have been shaded blue. Can you confirm?

>Hi Deepak,

Can you kindly send me the excel sheet you used to calcuate the corpus to my email id, mkbansal@gmail.com

>To people who want me to send the excel sheet – you can download it at http://www.deepakshenoy.com/articles/blog/RetirementPlan.xls

>Sambaran: You can ignore rows 23 and 24 – they were for something else 🙂

>If row-23 and 24 are to be ignored, in that case can you please make a provision for a cell which can capture my current net-worth and calculate accordingly?